The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq are trending into higher highs
above all moving averages. Near-term support is at the 10-DMA ( S&P 500: 3,181; Nasdaq: 8,786 ), followed by
the 21-DMA ( S&P 500: 3,153; Nasdaq: 8,690 ). Distribution remains at four days on both indices.
All 11 sectors, 179 of 197 industry groups, and 81% of S&P 500 stocks are trading above their respective 50-
DMA. Health Care, Consumer Cyclical, and Technology are each trading 5% or more above that level. Leading
industry groups over the last week include Auto Manufacturers ( TSLA ), Oil & Gas ( GPRK ), Data Storage ( MU ),
Semiconductors ( NVDA ), Lodging ( H ), Managed Care ( CI ), and Utilities ( NEE ).
Author: Raj Gupta
Raj Gupta is Director, Research Analyst.
After joining the firm in 2002 as a research analyst, Raj was appointed senior equity analyst in 2006, and lead senior equity analyst in 2014—largely because of his ability to select outperforming stocks. He acts as an expert in the O’Neil Methodology and contributes to the direction of product and service line development. He recommends securities for addition to or removal from the U.S. Focus List, or USFL, and the associated alerts to clients. During his tenure, he was part of the leadership that developed the Global Focus List, which marked the firm’s successful expansion into international equity recommendations. He is also a lead on the IPO Rewind report and contributes to weekly summaries on the performance of the U.S. market. Much of his expertise is delivered as highly customized service to clients.
RAj earned his Bachelor’s degree in Economics from the University of California, Santa Barbara. He began working at the firm directly out of college, driven by his passion for investing and stocks. An avid soccer player, he built and managed an adult league in the Los Angeles area, in which he still plays. He also enjoys international travel; he and his wife commit to at least one major adventure a year.
Market View
U.S. Market
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq made new all-time highs this
week, continuing to trend higher above all major moving averages. Distribution stands at four days each with no
expiration for two weeks.
Ten of 11 sectors, 167 of 197 industry groups, and 72% of S&P 500 stocks are trading above their respective
50-DMA. Health Care is leading over the trailing four, eight, and 13 weeks, despite pausing this week to consolidate gains. Consumer Cyclical and Technology are also performing well over the last month, while Energy has
recently rallied off four-month lows. Leading industry groups over the last week include Data Storage ( MU ), Semiconductors ( QRVO ), Pharmaceuticals ( BMY ), Gaming ( LVS ), and Mining ( PAAS ).
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq gapped up off their 21-DMA after
pulling back sharply to this moving average earlier in the week. Despite the volatility, indices closed relatively
unchanged for the week. Support remains at the 21-DMA (S&P 500: 3,113; Nasdaq: 8,550) with three distribu-
tion days on the S&P 500 and four on the Nasdaq.
Ten of 11 sectors, 146 of 197 industry groups, and 67% of S&P 500 stocks are trading above their respective
50-DMA. Health Care is the best performing sector over the trailing four, eight, and 13 weeks. Additionally,
seven of 15 healthcare-related industry groups are ranked in the top 55 of the O’Neil 197 (Best=1, Worst=197)
led by Biotech ( INCY ), Outpatient Care ( ADUS ), Equipment ( DXCM ) and Managed Care ( UNH ).
We remain positive on the general market. Despite the pullback earlier this week, indices remain above moving
average support as leadership remains intact. Continue to selectively increase risk in quality ideas emerging
from early-stage consolidation.
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq made new all-time highs this week
as both continue to trend higher off their respective 10-DMA. Distribution remains low at two days each, with
one expiring on the S&P 500 next week. We expect the market to consolidate gains in the coming days given the
sharp move higher over this past week. Should that occur, look for underlying action among quality growth
ideas to remain constructive.
Nine of 11 sectors are trading above their respective 50-DMA, led by Health Care which was up 1.7% this week
after recently breaking into new all-time highs. Technology is also leading, trending into all-time highs similar to
the major averages. Energy and Utility continue to lag, both trading relatively flat on the week and still ~1% be-
low their 50-DMA. 159 of 197 industry groups and 72% of S&P 500 stocks are trading above their respective
50-DMA, improving from 141 and 67% last week, respectively. The best performing industry groups this week
include Biotech (
), Software (
), Internet Retail (
), Lodging (
), Apparel (
), and Home Fur-
nishings (
).
Market View
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq consolidated gains this week, trad-
ing slightly lower but remaining above all major moving averages. The 21-DMA (S&P 500: 3,079; Nasdaq:
8,423) remains a primary level of near-term support. The distribution day count is low at two days each.
Nine of 11 sectors, 141 of 197 industry groups, and 67% of S&P 500 stocks are trading above their respective
50-DMA. Health Care is trading ~7% above its 50-DMA after breaking into new all-time highs this week. The
best performing industry groups this week include Biotech ( VRTX ), Long-Term Care ( AMED ), Managed Care
( UNH ), and Software ( SPLK ).
We remain positive on the general market. Despite sideways consolidation among the major averages, underly-
ing action across growth-oriented ideas and groups was very strong. Multiple ideas are breaking out from con-
solidation and pushing into higher highs. We continue to recommend selectively increasing risk in quality ideas
as they emerge from sound bases.
Market View
U.S. Market
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq gapped up and sustained strength
throughout the session as both indices are poised to trend higher. Short-term support is at the rising 21-DMA
(S&P 500: 3,054; Nasdaq: 8,339).
Nine of 11 sectors are trading at or above their respective 50-DMA, led by Technology (5.7%), Basic Material
(+5.6%), Transportation (+5.4%), and Capital Equipment (+5.2%) over the trailing four weeks, while Consumer
Staple (+0.5%) and Utility (-2.4%) are lagging. We continue to see a gradual improvement in the base consolidation of growth-oriented sectors/groups. Standout industry groups include Semiconductors (
), Security
(
), and Medical Equipment (
).
We continue to recommend increasing risk
Market View
U.S. Market
The U.S. market remains in a Confirmed Uptrend. The S&P 500 and Nasdaq continue to display constructive
technical action, consolidating near all-time highs with just one distribution day each. Support along the 21- and
50-DMA continues to rise toward current prices.
Market View
U.S. Market
The U.S. market is in a Confirmed Uptrend. The S&P 500 and Nasdaq are trading at all-time highs after clearing above multiple levels of resistance throughout the week. On Friday, the S&P 500 cleared above longer-term
resistance along its weekly upper channel line. Going forward, we will be looking for indices to consolidate
gains constructively, avoiding any big pick up in distribution, while support along the 21- and 50-DMA catches
up to current prices.
Seven of 11 O’Neil sectors are now trading 2% or move above their respective 50-DMA, led by Health Care,
Technology, and Capital Equipment. Defensive sectors, Utility and Consumer Staple, as well as Energy, continue
to lag all, trading flat to down over the last week. Industry groups under significant accumulation this week include Biotech, Medical Products/Equipment, Semiconductors, and Electronic Products. 71% of S&P 500 stocks
are trading above their respective 50-DMA, up from 68% last week.
Haemonetics
Key points:
- Add to Positions as Stock Clears Above its 50-DMA: The stock is now forming the right side of a new base, regaining its 50-DMA in heavy volume following another big earnings beat. Add to positions here. We continue to like HAE going forward for four main reasons: 1) 80% market share within the automated plasma collection market; 2) the newest and best machine on the market, which remains in an ongoing upgrade cycle; 3) two of their largest customers have yet to upgrade leaving upside to revenue guidance; and 4) significant demand for source plasma. We believe this supports a premium multiple of 35–40x and we believe, given 13 straight quarterly EPS beats (last two beats by more than 20%), there is likely upside to FY21 EPS of $3.78.
- Beat-and-Raise Q2 FY20 Results: Adjusted EPS increased 55% y/y to $0.87, well ahead of consensus of $0.70. The company reported Q2 FY20 revenue of $252.6M (+5% y/y), slightly ahead of consensus of $249.8M. Adjusted EPS guidance was raised to $3.10–3.20 (+31.7% y/y at the midpoint) from $2.95–3.15 (+27.5% y/y at the midpoint), ahead of consensus of $3.07.
- Still Room to Go: The company launched their NexSys PCS system, an automated platform used to collect plasma, in H2 2018. This new system enhances plasma yield by 3% and, thus far, has reduced customer costs by 10%. NexSys PCS is 20% penetrated in the replacement cycle of the company’s older PCS 300 system installed base of 20K.
- Growing Addressable Market:Haemonetics estimates the global plasma collection market will reach $6B by 2024, an 8% CAGR. It is the global leader in the plasma collection market, with an 80% share, and will benefit from ongoing demand from biotech companies to collect source plasma to treat rare diseases.
- Next Catalyst: Haemonetics will release Q3 FY20 results in early February.
Wuxi Apptec
Key points:
- Hong Kong Health Care continues to outperform: Following up on our October 21 report, multiple Focus List ideas have made new highs including Jinxin Fertility ( JIFG.HK; 1951 HK ), Shandong Weigao Group ( SDW.HK; 1066 HK ), Wuxi Apptec ( WUXA.HK; 2359 HK ), Yichang Hec Changjiang ( YHEC.HK; 1558 HK ), and new add Wuxi Biologics ( WXBO.HK; 2269 HK ).
- Wuxi Apptec reported better-than-expected Q3 results:Wuxi reported better-than-expected Q3 revenue and net profit. The stock broke into new highs on 4.5x average daily volume. Hold positions and look to add on pullbacks to the rising 21-DMA.
- Poised to outgrow China’s attractive outsourcing industry:China’s CRO market is expected to grow more than 20% per year to reach $23.3B by 2022. Among China-based R&D outsourcing service providers, Wuxi has the largest market share at 8.3%, ahead of its closest competitors at 2.4% and 1.8%. After adding 1,400+ customers in 2018, Wuxi added 900 new customers during the nine months ended September 2019, taking its active customer count to more than 3,700.
- Ongoing projects leading to higher milestone and royalty fees:As of September 2019, the company had 900 CDMO/CMO small molecule projects, of which 40 are in phase 3 clinical trials and 17 are commercialized. Wuxi has success-based agreements with more than 30 Chinese customers for providing integrated drug discovery and R&D services for a milestone and/or royalty fee.
- Next catalyst: The company will announce 2019 results in late March 2020.
